“Explain to me how the stock market is not rigged if only 20 stocks account for almost 30% of all daily trading volume, if only 99 stocks account for more than 50% of all daily trading volume and if the bottom 12,112 stocks account for less than 0.05% of daily trading volume?”

Though these were the statistics for the US New York Stock Exchange during the month of June, similar shenanigans were used to rig other major global stock market indexes higher during the global stock market rallies that occurred during the first half of 2010. In 2007, an analysis of the world’s stock markets revealed that only a handful of financial firms controlled the bulk of trading volume every day on the world’s leading stock exchanges, with the most concentrated power being exhibited in the US, the UK and Australia.

At times, during the first phase of our current global monetary crisis, the rigging games were even worse (yes, despite the exhortations of politicians that the global economy is recovering, there will be a second phase to our global monetary crisis). For days on end in 2008 and 2009, when it was necessary to rig the share prices of Fannie Mae, Freddie Mac, Citigroup, AIG higher to prevent an absolute loss of confidence in the US financial sector, those four stocks alone accounted for 33% to 50% of the daily trading volume on the NYSE. On December 17, 2009, Citigroup stock ALONE accounted for an astonishing 47% of the composite daily trading volume in US markets. One has to remember that before the monetary crisis reared its ugly head that C, FNM and FRE only comprised 1% -3% of the daily composite trading volume in the US. Knowing this makes the above percentages I discussed seem even more ludicrous. Though those ridiculously rigged percentages have now fallen considerably, the fact that in June, a mere 99 stocks still accounted for MORE THAN HALF of all daily trading volume in the US stock markets needs to be addressed. So ask your broker why this is.

If your broker admits that the markets are rigged (and there is almost no possible way he or she can deny that markets are gamed though it would be an amusing experience to listen to how your broker might explain the above facts in the same breath of an explanation that markets are still free), and the rigging produces random days when the market shoots up 2.5% only to fall 2.5% two days later, then ask your broker the follow-up question: “If algorithmic High Frequency Trading programs are manipulating the world’s broad stock market indexes daily as seems clear from stock market trading patterns, then why should I possibly engage in investing in the broad stock market indexes if there is virtually zero chance of me beating the HFT programs?”

Remember that the commercial investment industry and Wall Street titans have always rigged the stock market game to their extreme favor. This is why JP Morgan, Bank of America, Citigroup and Goldman Sachs reported PERFECT 2nd quarters this year, when all declared 60 profitable trading days out of 60 trading days even as the US S&P 500 plummeted 15% and produced multiple days when 2% plummets were followed the next day or just days later with 2% explosions higher. To perfectly predict these huge swings in volatility and be profitable every single day does not seem plausible – unless…unless you are the firms rigging the market. Though Citigroup doesn’t break out its trading revenue by quarter, two insiders at Citigroup were knowledgeable of its trading activities stated that Citigroup had a perfect trading record during the second quarter.

Matthew McCormick, a banking analyst at Bahl & Gaynor Inc. in Cincinnati, stated, “It’s statistically improbable to have three firms batting 1,000 and also pitching a perfect game. You wonder why the rest of America has some suspicion about proprietary trading.” I would go further than McCormick and say that it is statistically IMPOSSIBLE under free market conditions, given the enormous volatility in the 2nd quarter 2010 in US markets when 2% plummets in stock market indexes were followed by random 2% explosions higher for no apparent fundamental reasons, for not four, BUT FOR EVEN ONE firm to declare a perfect daily trading record unless they control the systems that control the markets.

During the global monetary crisis, the gaming factor has undoubtedly increased exponentially. Unless you are a professional capable of identifying how the system is being gamed (which 99.9% of “professional” brokers are not), you have virtually no shot at beating the gamed system today. Every professional trader, even the skeptics, have been forced to admit that the signs are too overwhelming that the major global stock markets are being gamed these days. So just remember that in a scam there is always a shill and a mark. To answer the question of whether you have any business investing in broad stock market indexes that are so obviously rigged, ask your broker/adviser to answer the first question above and listen to his/her explanation. Then remember, if after the conversation, you still can’t figure out who the mark in the game is, that means the mark is you. And when the rigging games fail to maintain their staying power, as the rally that global stock markets experienced in the first half of 2010 were all fake, better watch out below. This is why we’ve always said on our website at SmartKnowledgeU, “if one expects to be profitable in today’s investment world, one MUST realize that ALL MARKETS ARE RIGGED” and absent of this realization, it is next to impossible to come out on top.

"Though those ridiculously rigged percentages have now fallen considerably, the fact that in June, a mere 99 stocks still accounted for MORE THAN HALF of all daily trading volume in the US stock markets needs to be addressed. So ask your broker why this is."

But let's first ask the Underground Man, sorry, I mean the Underground Investor, what was the percentage commanded by these 99 stocks in the other months.

"Matthew McCormick, a banking analyst at Bahl & Gaynor Inc. in Cincinnati, stated, “It’s statistically improbable to have three firms batting 1,000 and also pitching a perfect game. You wonder why the rest of America has some suspicion about proprietary trading.”"

This statement implies that these 60 profitable days were all proprietary trading, which could not be true if the other assumption (that they were only buying and selling from each other) is accepted. If they only bought and sold from each other, they can't all be winners.

If I were a stock brocker, and my client asked me that same question "Explain to me...", here is what I would say:

The market is not rigged any more than it was rigged before. It is just these conspiracy-loving people, who lost money from March 2009 to April of 2010 when it was impossible to lose money unless you were shorting the market, that are now coming up with stuff like this just so they can feel better about their losses ("It wasn't me, it's the market that's rigged").

Like market wasn't rigged from 2007-2009, when they felt so samrt for shorting the market. Give me a break.

My client: "But how do you then explain that only 99 stocks account for more than 50% of the volume during the month of June?"

It's easy. The market is going down on low volume. Same thing happened in May of 2010.

Market went down quite a bit during these 2 months, but on low volume.

Take a look at charts of some of the biggest winners since March of 2009.

Let's take BAC for example. BAC was at $3 back in mArch of 2009, now is at $14. Not a bad return, wouldn't you say?

What do you see? Is the volume during the months of May and June of 2010 even close to the volume of March, April, and May of 2009?

Or let's take FITB for example, the stock that went from March's price of $1 to today's price of $12 ("How do you like them apples", thinking to myself).

How about CBG, which went from $3 to $13?

SLG, today a $54 stock, which was at $10 back in March of 2009.

XL, $3 to $16.

My client: "OK, I get it now. I see why only 99 stocks made up 50% of the volume in the month of June. Big winers / great stocks weren't being sold that much. I'm guessing junk stocks are still the ones that have traders' attention.

"Matthew McCormick, a banking analyst at Bahl & Gaynor Inc. in Cincinnati, stated, “It’s statistically improbable to have three firms batting 1,000 and also pitching a perfect game. You wonder why the rest of America has some suspicion about proprietary trading.” I would go further than McCormick and say that it is statistically IMPOSSIBLE under free market conditions, given the enormous volatility in the 2nd quarter 2010 in US markets when 2% plummets in stock market indexes were followed by random 2% explosions higher for no apparent fundamental reasons, for not four, BUT FOR EVEN ONE firm to declare a perfect daily trading record unless they control the systems that control the markets."

DragonLZ - I would agree that it is statistically impossible for all of these firms to have had perfect trading records. How would you address this point alone?

Also, you mention the market falling on low volume. Lately, the opposite has been true. We've seen the market rise on a fraction of average daily volume and the market tank nearly every time volume picks up.

Dragon, could you clarify something for me? By using that wording, are you saying that the market is not and has not been rigged, or that it's always been rigged?

If I were an investor asking the initial question (which is probably prompted by a suspicion that the markets aren't on the up and up), I would infer the latter. That being the case, if my broker gave me that exact response, they'd be my ex-broker before the call was finished.

If you are trying to outsmart the market by predicting daily, monthly or even yearly swings you are going to come to the conclusion that the market is rigged...simply because you will eventually mistake your luck for skill and eventually get your *ss handed to you.

Understandably you will become bitter and scour the internet for other angry people who will support your thesis because they too lost their life savings when their trades were stolen from them by GS, the PPT, the e-mini monster, etc.

I will not argue that large trading operations do not have an "unfair" advantage. Of course they do...trading is their business! You and your etrade platform just doesn't cut it when it comes to scalping Citi on the short side day after day.

Do you really think that someone cares about which side of the trade that you and your $25k is on.

If you are day/swing trading Citi, Fannie and/or Freddie at this point in time, and try to argue that the market is rigged, you really should take some time to reflect and give yourself some time away from the internet and You Tube.

I echo the sentiment of allstarvulture. Are you saying that the market has never been rigged or that the market has always been rigged or that there has always been a level of "gaming the system" by insiders?

I'm not placing a value judgment on any of these outcomes, but if you are saying that others are wacko conspiracy theorists you haven't done a whole lot to dispell them with your assertion.

It's like a small dog saying that the world is rigged because the big dogs can bark louder. That may be true, but it doesn't mean that small dogs have to stop barking. It just means they should not bark at big dogs when big dogs are around. Translated to the financial vernacular, it means that retail investors like abitare should not try to beat GS at predicting daily movements of stock prices. GS can move prices on a daily bases more efficiently than abitare ever will.

People keep saying things like "statistically impossible," but I have yet to see any real data. I thought the idea with trading and investing is that you have to show your work if you're going to make assertions or predictions - particularly one as sweeping as the game is rigged.

OK, Let's assume it is statistically impossible. That doesn't mean the game is rigged. Note "free market conditions," although I'm not exactly sure what that's supposed to mean. All this is hand-waving. What are the actual statistics on 60 straight days of perfect trading? Otherwise, you're just guessing and conjecturing, jumping to conclusions before you even have all the facts.

What good does it do anyone to say what you're saying? How do I trade that?